Filed pursuant to Rule 424(b)(3)
Registration No.
333-195710
PROSPECTUS SUPPLEMENT NO. 1
27,173,913 Shares of Common Stock
WORLD MOTO INC.
This Prospectus Supplement No. 1 supplements and amends our
Prospectus dated December 8, 2014. This Prospectus Supplement No. 1 includes our
attached Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, as
filed with the Securities and Exchange Commission on May 20, 2015.
The Prospectus, any prospectus supplements filed before the
date hereof, and this Prospectus Supplement No. 1 relate to the registration and
resale of up to 27,173,913 shares of our common stock, par value $0.0001 per
share, by the selling security holders (the Selling Security Holders), of
which up to: (a) 9,098,408 shares of common stock are issuable upon the
conversion of the principal amount of the convertible debenture, dated April 4,
2014, issued to Dominion Capital LLC (the Dominion Debenture), (b) 1,091,809
shares of common stock are issuable upon the conversion of interest accrued
under the Dominion Debenture, (c) 3,032,803 shares of common stock are issuable
upon the conversion of the principal amount of the convertible debenture, dated
April 4, 2014, issued to Redwood Management, LLC (the Redwood Debenture,
together with the Dominion Debenture, the Initial Debentures), (d) 363,936
shares of common stock are issuable upon the conversion of interest accrued
under the Redwood Debenture, (e) 9,098,408 shares of common stock are issuable
upon the conversion of the principal amount of a convertible debenture to be
issued by the Company to Dominion (the Additional Dominion Debenture), (f)
1,091,809 shares of common stock are issuable upon the conversion of the
interest to be accrued under the Additional Dominion Debenture, (g) 3,032,803
shares of common stock are issuable upon the conversion of the principal amount
of a convertible debenture to be issued by the Company to Redwood (the
Additional Redwood Debenture, together with the Additional Dominion Debenture,
the Additional Debentures), and (h) 363,936 shares of common stock are
issuable upon the conversion of the interest to be accrued under the Additional
Redwood Debenture.
We will not receive any of the proceeds from the sale of shares
by the Selling Security Holders. These shares will be offered for sale by the
Selling Security Holders in accordance with the Plan of Distribution. We will
bear all costs associated with this registration. No underwriter or person has
been engaged to facilitate the sale of shares of our common stock in this
offering.
This Prospectus Supplement No. 1 should be read in conjunction
with the Prospectus and any prospectus supplements filed before the date hereof.
Any statement contained in the Prospectus and any prospectus supplements filed
before the date hereof shall be deemed to be modified or superseded to the
extent that information in this Prospectus Supplement No. 1 modifies or
supersedes such statement. Any statement that is modified or superseded shall
not be deemed to constitute a part of the Prospectus except as modified or
superseded by this Prospectus Supplement No. 1.
Our common stock is quoted on the OTC marketplace, under the
stock symbol FARE. On May 19, 2015, the closing price of our common stock was
$0.01 per share.
Investing in our common stock involves a high degree of
risk. See Risk Factors beginning on page 12 to read about factors you should
consider before investing in shares of our common stock.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS OR PROSPECTUS SUPPLEMENT NO. 1 IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is May 20, 2015.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2015
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACTOF 1934
For the transition period from __________ to __________
Commission file number: 000-54694
WORLD MOTO, INC.
(Exact name of registrant as specified in its charter)
Nevada |
77-0716386 |
(State or other jurisdiction |
(IRS Employer Identification No.)
|
of Incorporation or organization) |
|
131 Thailand Science Park INC-1 #214
Phahonyothin Road
Klong1,
Klong Luang
Pathumthani 12120
Thailand
(Address of principal executive
offices and zip code)
(646) 840-8781
(Registrants telephone
number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X]
Yes [ ] No
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
[X] Yes [ ] No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act.
[ ] Large accelerated filer |
[ ] Accelerated filer |
[ ] Non-accelerated filer |
[X] Smaller Reporting company |
|
|
|
|
|
|
(Do not check if smaller reporting company) |
|
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
[ ]
Yes [X] No
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date.
Class |
|
Outstanding at May 19, 2015 |
Common stock, $.0001 par value |
|
460,124,325 |
World Moto, Inc.
Form 10-Q
For the Three Months Ended March 31, 2015
INDEX
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward-looking statements
within the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Reference is made in particular to the
description of our plans and objectives for future operations, assumptions
underlying such plans and objectives, and other forward-looking statements
included in this report. Such statements may be identified by the use of
forward-looking terminology such as may, will, expect, believe,
estimate, anticipate, intend, continue, or similar terms, variations of
such terms or the negative of such terms. Such statements are based on
managements current expectations and are subject to a number of factors and
uncertainties, which could cause actual results to differ materially from those
described in the forward-looking statements. Such statements address future
events and conditions concerning, among others, capital expenditures, earnings,
litigation, regulatory matters, liquidity and capital resources, and accounting
matters. Actual results in each case could differ materially from those
anticipated in such statements by reason of factors such as future economic
conditions, changes in consumer demand, legislative, regulatory and competitive
developments in markets in which we operate, results of litigation, and other
circumstances affecting anticipated revenues and costs, and the risk factors set
forth in our Annual Report on Form 10-K filed on April 16, 2015.
As used in this Form 10-Q, we, us, and our refer to
World Moto, Inc., which is also sometimes referred to as the Company.
YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING
STATEMENTS
The forward-looking statements made in this report on Form
10-Q relate only to events or information as of the date on which the statements
are made in this report on Form 10-Q. Except as required by law, we undertake no
obligation to update or revise publicly any forward-looking statements, whether
as a result of new information, future events, or otherwise, after the date on
which the statements are made or to reflect the occurrence of unanticipated
events. You should read this report and the documents that we reference in this
report, including documents referenced by incorporation, completely and with the
understanding that our actual future results may be materially different from
what we expect or hope.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
World Moto, Inc.
Consolidated Balance Sheets
(Unaudited)
|
|
March 31, 2015 |
|
|
December 31, 2014 |
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
113,323 |
|
$ |
169,265 |
|
Prepaid expenses and other
current assets |
|
34,847 |
|
|
20,741 |
|
Inventory |
|
5,294 |
|
|
2,986 |
|
|
|
|
|
|
|
|
Total current assets |
|
153,464 |
|
|
192,992 |
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated
depreciation |
|
22,581 |
|
|
24,215 |
|
Deferred financing costs, net
of accumulated amortization |
|
15,883 |
|
|
28,867 |
|
Other assets |
|
11,101 |
|
|
10,984 |
|
|
|
|
|
|
|
|
TOTAL ASSETS |
$ |
203,029 |
|
$ |
257,058 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable and accrued
expenses |
$ |
236,774 |
|
$ |
211,336 |
|
Convertible notes
payable, net of discount of $760,791 and $779,572, respectively |
|
167,296 |
|
|
274,123 |
|
Derivative note liabilities |
|
1,675,155 |
|
|
1,256,159 |
|
Short-term debt
related party |
|
46,190 |
|
|
45,707 |
|
Unearned revenues |
|
59,415 |
|
|
59,056 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
2,184,830 |
|
|
1,846,381 |
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
Stockholders deficit: |
|
|
|
|
|
|
Preferred stock, $0.0001
par value; 50,000,000 shares
authorized; no
shares issued and outstanding |
|
- |
|
|
- |
|
Common
stock, $0.0001 par value, 2,000,000,000 shares
authorized;
435,960,255 and 395,369,204 shares issued and outstanding, respectively |
|
43,596 |
|
|
39,536 |
|
Additional paid-in capital |
|
2,234,335 |
|
|
1,752,443 |
|
Accumulated
deficit |
|
(4,243,761 |
) |
|
(3,365,780 |
) |
Other comprehensive loss |
|
(15,971 |
) |
|
(15,522 |
) |
Total
stockholders' deficit |
|
(1,981,801 |
) |
|
(1,589,323 |
) |
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT |
$ |
203,029 |
|
$ |
257,058 |
|
The accompanying notes are an integral part of these unaudited financial
statements.
World Moto, Inc. |
Consolidated Statements of Operations and
Comprehensive Loss |
(Unaudited) |
|
|
For the three
months ended |
|
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
Revenues |
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
Research and development |
|
102,825 |
|
|
121,106 |
|
General and
administrative |
|
99,249 |
|
|
139,011 |
|
Total operating expenses |
|
202,074 |
|
|
260,117 |
|
|
|
|
|
|
|
|
Loss from operations |
|
202,074 |
|
|
260,117 |
|
|
|
|
|
|
|
|
Other income/expense: |
|
|
|
|
|
|
Interest expense |
|
323,170 |
|
|
396 |
|
Interest income |
|
- |
|
|
(6 |
) |
Change in fair
value of derivative liabilities |
|
352,807 |
|
|
- |
|
Foreign current transaction loss (gain) |
|
(70 |
) |
|
(256 |
) |
Total expense |
|
675,907 |
|
|
134 |
|
|
|
|
|
|
|
|
Net loss |
$ |
(877,981 |
) |
$ |
(260,251 |
) |
|
|
|
|
|
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
Foreign currency translations |
|
(449 |
) |
|
(2,511 |
) |
|
|
|
|
|
|
|
Total comprehensive loss |
$ |
(878,430 |
) |
$ |
(262,762 |
) |
|
|
|
|
|
|
|
Net loss per common share -
basic and diluted |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding basic and diluted |
|
415,699,254 |
|
|
378,033,149 |
|
The accompanying notes are an integral part of these unaudited financial
statements.
World Moto, Inc. |
Consolidated Statements of Cash Flows |
(Unaudited) |
|
|
For the three
months ended |
|
|
|
March 31, |
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
Net loss |
$ |
(877,981 |
) |
$ |
(260,251 |
) |
Adjustments
to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
1,634 |
|
|
3,861 |
|
Fair value of derivative in excess of debts |
|
161,264 |
|
|
- |
|
Amortization of debt discount and deferred financing cost |
|
160,011 |
|
|
- |
|
Change in fair value of derivative liability |
|
352,807 |
|
|
- |
|
Changes in
operating assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
(14,223 |
) |
|
(26,660 |
) |
Inventory |
|
(2,308 |
) |
|
- |
|
Unearned revenues |
|
- |
|
|
24,980 |
|
Accounts
payable and accrued expenses |
|
26,280 |
|
|
113,719 |
|
Net cash used in
operating activities |
|
(192,516 |
) |
|
(144,351 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
|
|
Purchases of property and equipment |
|
- |
|
|
(873 |
) |
Net cash used in
investing activities |
|
- |
|
|
(873 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
|
|
Proceeds from convertible notes, net of financing costs |
|
137,023 |
|
|
- |
|
Net cash
provided by financing activities |
|
137,023 |
|
|
- |
|
|
|
|
|
|
|
|
EFFECT OF FOREIGN CURRENCY
TRANSLATIONS |
|
(449 |
) |
|
(2,511 |
) |
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
(55,942 |
) |
|
(147,735 |
) |
Cash and cash equivalent at beginning of the
period |
|
169,265 |
|
|
179,132 |
|
|
|
|
|
|
|
|
Cash and cash equivalent at end of the period |
$ |
113,323 |
|
$ |
31,397 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOWS INFORMATION: |
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
Income tax |
$ |
- |
|
$ |
- |
|
Interest |
|
- |
|
|
- |
|
NONCASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Shares issued
for conversion of debt |
$ |
234,355
|
|
$ |
- |
|
Reclassification of fair value
of derivatives from liabilities to equity |
|
251,597 |
|
|
- |
|
The accompanying notes are an integral part of these unaudited financial
statements.
World Moto, Inc.
Notes to the Consolidated Financial Statements
(Unadudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
World Moto, Inc. (the Company) was incorporated in the State
of Nevada on March 24, 2008 under the name Net Profits Ten Inc. The original
purpose of the Company was to market and distribute user-friendly interactive
yearbook software for the military. The Company was reclassified as a shell
company until the completion of its acquisition of the World Moto Assets, which
was consummated on November 14, 2012, and discussed in Note 3. Effective
November 12, 2012, the Company amended its Articles of Incorporation to change
its name from Net Profits Ten Inc. to World Moto, Inc.
On January 30, 2013, World Moto, Inc. established two wholly
owned subsidiaries that were incorporated in the State of Nevada. World Moto
Technologies, Inc. and World Moto Holdings, Inc. were both established, but have
no activity to report to date. On February 4, 2013, World Moto Technologies Ltd,
a wholly owned subsidiary of the Company, was organized under the laws of the
Kingdom of Thailand and the name of this company was later changed to World Moto
Co., Ltd. World Moto Co., Ltd. is owned in its entirety by World Moto, Inc.,
World Moto Technologies, Inc. and World Moto Holdings, Inc. and it is an
operating entity of the Company in Thailand for the purposes of research and
development in the Southeast Asia region.
Basis of Presentation
The unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information in accordance with Securities
and Exchange Commission ("SEC") Regulation S-X rule 8-03 and should be read in
conjunction with the audited financial statements and notes thereto contained in
the Company's last Annual Report filed with the SEC on Form 10-K for the year
ended December 31, 2014. In the opinion of management, the unaudited
consolidated financial statements have been prepared on the same basis as the
annual financial statements and reflect all adjustments, which include normal
recurring adjustments, necessary to present fairly the financial position as of
March 31, 2015 and the results of operations and cash flows for the periods then
ended. The financial data and other information disclosed in these notes to the
interim consolidated financial statements related to the period are unaudited.
The results for the three-month period ended March 31, 2015 are not necessarily
indicative of the results to be expected for any subsequent quarters or for the
entire year ending December 31, 2015. Notes to the unaudited interim
consolidated financial statements that would substantially duplicate the
disclosures contained in the audited financial statements for the most recent
fiscal year as reported in the Form 10-K have been omitted.
Principal of Consolidation
The consolidated financial statements include the accounts of
World Moto Technologies, Inc., World Moto Holdings, Inc., and World Moto Co.
Ltd, all 100% owned subsidiaries. All significant intercompany balances and
transactions have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased
with a maturity of three months or less to be cash equivalents to the extent the
funds are not being held for investment purposes.
Foreign Currency Translation
The functional currency of our subsidiary is the Thai Baht.
Monetary assets and liabilities denominated in currencies other than the
functional currency are translated into the functional currency at rates of
exchange prevailing at the balance sheet dates. Transactions denominated in
currencies other than the functional currency are translated into the functional
currency at the exchange rates prevailing at the dates of the transaction.
Exchange gains or losses arising from foreign currency transactions are included
in the determination of net income (loss) for the respective periods.
For financial reporting purposes, the financial statements of
the subsidiary are translated into the Companys reporting currency, United
States Dollars (USD). Asset and liability accounts are translated using the
closing exchange rate in effect at the balance sheet date, equity account and dividend are translated using
historical exchange rates and income and expense accounts are translated using
the average exchange rate prevailing during the reporting period.
Adjustments resulting from the translation, if any, are
included in accumulated other comprehensive income (loss) in stockholders
equity (deficit).
Long-Lived Assets
Property and equipment
Property and equipment are recorded at cost. Expenditures for
major additions and improvements are capitalized and minor replacements,
maintenance, and repairs are charged to expense as incurred. When property and
equipment are retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is
included in the results of operations for the respective period. Depreciation is
provided over the estimated useful lives of the related assets using the
straight-line method of 3 years for financial statement purposes.
Software
The Company capitalizes software acquisition and development
costs incurred during the software application development stage. The software
application development stage is characterized by software design and
configuration activities, coding, testing and installation. Training and
maintenance costs are expensed as incurred, while upgrades and enhancements are
capitalized if it is probable that such expenditures will result in additional
functionality. Capitalized software acquisition and development costs, once
placed in service, are amortized using the straight-line method over the
estimated useful life of 3 to 10 years. Capitalized software acquisition and
development costs subject to amortization are carried at cost less accumulated
amortization.
Patents
Patents are initially measured based on their fair values.
Patents are being amortized on the straight-line method over the estimated
useful life of 10 to 20 years.
Management evaluates the recoverability of the Companys
property and equipment including patent development costs when events or
circumstances indicate a potential impairment exists. The Company considers
certain events and circumstances in determining whether the carrying value of
identifiable property and equipment may not be recoverable including, but not
limited to: significant changes in performance relative to expected operating
results; significant changes in the use of the assets; significant negative
industry or economic trends; and changes in the business strategy. In
determining if impairment exists, the Company estimates the undiscounted cash
flows to be generated from the use and ultimate disposition of these assets. If
impairment is indicated based on a comparison of the assets' carrying values and
the undiscounted cash flows, the impairment loss is measured as the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
Income Taxes
The Company uses the asset and liability method in accounting
for income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and income tax
carrying amounts of assets and liabilities and are measured using the enacted
tax rates and laws that will be in effect when the differences are expected to
reverse. The Company reviews deferred tax assets for a valuation allowance based
upon whether it is more likely than not that the deferred tax asset will be
fully realized. A valuation allowance, if necessary, is provided against
deferred tax assets, based upon managements assessment as to their realization.
Fair Value Measurement
The Company values its derivative instruments under FASB ASC
820 which defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (exit price). The Company utilizes market
data or assumptions that market participants would use in pricing the asset or
liability, including assumptions about risk and the risks inherent in the inputs
to the valuation technique. These inputs can be readily observable, market
corroborated, or generally unobservable. The Company classifies fair value
balances based on the observability of those inputs. ASC 820 establishes a fair
value hierarchy that prioritizes the inputs used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (level 1 measurement) and the lowest
priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 Quoted prices are available in active markets for
identical assets or liabilities as of the reporting date. Active markets are
those in which transactions for the asset or liability occur in sufficient
frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial
instruments such as exchange-traded derivatives, marketable securities and
listed equities.
Level 2 - Valuations for assets and liabilities that can be obtained from readily available pricing sources via independent providers for market transactions involving similar assets or liabilities. The Companys principal markets for these securities are the secondary institutional markets, and valuations are based on observable market data in those markets.
Level 3 Pricing inputs include significant inputs that are
generally less observable from objective sources. These inputs may be used with
internally developed methodologies that result in managements best estimate of
fair value. The Company uses Level 3 to value its derivative instruments.
The following table sets forth by level with the fair value
hierarchy the Companys financial assets and liabilities measured at fair value
on March 31, 2015.
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability |
$ |
- |
|
$ |
- |
|
$ |
1,675,155 |
|
$ |
1,675,155 |
|
Revenue Recognition
The Company recognizes revenue only when all of the following
criteria have been met:
|
Persuasive evidence of an arrangement exists;
|
|
Delivery has occurred or services have been
rendered; |
|
The fee for the arrangement is fixed or
determinable; and |
|
Collectibility is reasonably assured.
|
Persuasive Evidence of an Arrangement – The Company documents all terms of an arrangement in a written contract signed by the customer prior to recognizing revenue.
Delivery Has Occurred or Services Have Been Performed The
Company performs all services or delivers all products prior to recognizing
revenue. Monthly services are considered to be performed ratably over the term
of the arrangement. Professional consulting services are considered to be
performed when the services are complete. Equipment is considered delivered upon
delivery to a customers designated location.
The Fee for the Arrangement Is Fixed or Determinable Prior to
recognizing revenue, a customers fee is either fixed or determinable under the
terms of the written contract. Fees for most monthly services, professional
consulting services, and equipment sales and rentals are fixed under the terms
of the written contract. Fees for certain monthly services, including certain
portions of networking, storage, and content distribution and caching services,
are variable based on an objectively determinable factor such as usage. Those
factors are included in the written contract such that the customers fee is
determinable. The customers fee is negotiated at the outset of the arrangement
and is not subject to refund or adjustment during the initial term of the
arrangement.
Collectibility Is Reasonably Assured The Company determines
that collectibility is reasonably assured prior to recognizing revenue.
Collectibility is assessed on a customer by customer basis based on criteria
outlined by management. New customers are subject to a credit review process,
which evaluates the customers financial position and ultimately its ability to
pay. The Company does not enter into arrangements unless collectibility is
reasonably assured at the outset. Existing customers are subject to ongoing
credit evaluations based on payment history and other factors. If it is
determined during the arrangement that collectibility is not reasonably assured,
revenue is recognized on a cash basis.
Franchise Fee Revenue
Revenues from licensees include a royalty based on a percent of
sales, and may include initial fees. Continuing royalties are recognized in the
period earned. Initial fees are recognized upon granting of a new franchise
term, which is when the Company has performed substantially all initial services
required by the franchise arrangement and after the franchisee commences
operations. Additionally, the first twelve months of operations are royalty free
for the franchisee.
Stock-based Compensation
The Company expenses the cost of employee services received in
exchange for an award of equity instruments based on the grant date fair value
of such instruments over the service period.
Equity instruments issued to parties other than employees for
acquiring goods or services are recorded at either the fair value of the
consideration received or the fair value of the instruments issued in exchange
for such services, whichever is more reliably measurable.
Subsequent Event
The Company evaluated subsequent events through the date when
financial statements are issued for disclosure consideration.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements
that are in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial position or results of
operations.
NOTE 2 GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company has an
accumulated deficit of $4,243,761 as of March 31, 2015, has limited liquidity,
and has not established a reliable source of revenues sufficient to cover
operating costs over an extended period of time. These factors raise substantial
doubt about the Companys ability to continue as a going concern.
Management anticipates that the Company will be dependent, for
the near future, on additional investment capital to fund operating expenses.
The Company intends to position itself so that it may be able to raise
additional funds through the capital markets. In light of managements efforts,
there are no assurances that the Company will be successful in this or any of
its endeavors or become financially viable and continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
NOTE 3 UNEARNED REVENUES
On December 2, 2013, WM Co. Thailand entered into a Purchase
and Licensing Agreement (the "PL Agreement") with Mobile Advertising Ventures
Ltd. ("MAV"). Pursuant to the terms of the PL Agreement, MAV will purchase 10
initial "Wheelies" from WM Co. Thailand at a total purchase price of $35,000, and will
have an option to purchase an additional 190 Wheelies at a purchase price of
$3,500 per unit. WM Co. Thailand also grants a non-exclusive license to MAV for
the use of its software in connection with the operation of the Wheelies in
consideration for a fee based on net revenue per quarter from advertising sales
relating to the use of the Wheelies. The Company received $35,000 from MAV
before December 31, 2013 and has been recorded unearned as revenues.
On March 10, 2014, the Company entered into a Fleet Franchise Agreement ("the Franchise Agreement") with Mobile Advertising Ventures, Ltd. ("MAV"). MAV paid the Company $24,415 for the right to utilize the Yes software and all other trademarks of the Company, including but not limited to "Yes", "World Moto" and "Wheelies" (collectively, the "Marks") in the Federal Territory of Kuala Lumpur, Malaysia. Initial training has been completed for the Franchisee; however, the Franchisee has not begun operations. This revenue will be reclassified as earned when MAV completes its first sale using the Yes software.
NOTE 4 RELATED PARTY TRANSACTIONS
At March 31, 2015 and December 31, 2014, the Company has short-term debt of $46,190 and $46,707, respectively, due to one of its majority shareholders. The loan will be paid back from proceeds of the debenture financing that is expected to be completed by the end of the second quarter of 2015. The loan is accruing interest at a rate of 0%.
NOTE 5 CONVERTIBLE NOTES PAYABLE
On March 5, 2015, the Company entered into a convertible note with Redwood Management for an aggregate principal amount of $60,870 with a $4,348 original issue discount ("OID") and $12,000 in deferred financing costs for broker fees.
The note earns an interest rate equal to 12% per annum and
matures on March 5, 2016. The Company is obligated to make amortization payments
beginning on the six month anniversary of the issuance date of the Debentures
and continuing monthly thereafter. Pursuant to this note, the Company recorded a
debt discount of $56,522, as result of the embedded conversion feature being a
financial derivative. The Company also recorded a debt discount of $4,348 as
result of the 8% original issue discount. The Company determined that the fair
value of the conversion feature was $110,096 at the issuance date. The fair
value of the conversion feature in excess of the principal amount allocated to
the notes of $53,574 was expensed immediately as additional interest expense.
During the three months ended March 31, 2015, the Company recorded $4,324
amortization of the debt discount on the note.
On March 26, 2015, the Company entered into a convertible note with Macallan Partners for an aggregate principal amount of $112,000 with a $12,000 OID and $7,500 in deferred financing costs for broker fees.
The note earns an interest rate equal to 8% per annum and
matures on March 31, 2016. Pursuant to this note, the Company recorded a debt
discount of $100,000, as result of the embedded conversion feature being a
financial derivative. The Company also recorded a debt discount of $12,000 as
result of the 11% original issue discount. The Company determined that the fair
value of the conversion feature was $207,690 at the issuance date. The fair
value of the conversion feature in excess of the principal amount allocated to
the notes of $107,690 was expensed immediately as additional interest expense.
During the three months ended March 31, 2015, the Company recorded $1,509
amortization of the debt discount on the notes.
As summary of value changes to the notes for the three months ended
March 31, 2015 is as follows:
Carrying value of Convertible Notes at December 31, 2014 |
$ |
274,123 |
|
Additional borrowings |
|
172,870 |
|
Total principal |
|
446,993 |
|
Less: conversion carrying value of convertible notes |
|
(234,355 |
) |
Less: discount related to fair value of the
embedded conversion feature |
|
(152,870 |
) |
Less: discount related to
original issue discount |
|
(20,000 |
) |
Add: amortization of discount |
|
127,528 |
|
Carrying value of Convertible
Notes at March 31, 2015 |
$ |
167,296 |
|
The deferred financing costs are amortized by the Company through interest expense over the life of the notes. During the three months ended March 31, 2015, the Company recorded $32,484 amortization of the deferred financing costs.
NOTE 6 DERIVATIVE LIABILITIES
The Company has determined that the variable conversion prices
under its convertible notes caused the embedded conversation feature to be a
financial derivative. The Company may not have enough authorized common stock to
settle its obligation if the note holder elects to convert the note into common
shares when the trading price is lower than a certain threshold.
The derivative instruments were valued at loan origination
date, date of debt conversion and at March 31, 2015, The fair values of the
derivative liabilities related to the conversion options of these notes was
estimated on the transaction dates (loan original date and date of debt
conversion) using the Multinomial Lattice option pricing model, under the
following assumptions:
|
|
December 31, |
|
|
New |
|
|
March 31, |
|
|
|
2014 |
|
|
Issuances |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
Shares of common stock
issuable upon exercise of debt |
|
23,193,987 |
|
|
13,615,794 |
|
|
34,984,114 |
|
Estimated market value of common stock on
measurement date |
$ |
0.17 |
|
$ |
0.02-0.0261 |
|
$ |
0.0196 |
|
Exercise price |
$ |
0.00766 -
0.1 |
|
$ |
0.009 -
0.03 |
|
$ |
0.009 -
0.1 |
|
Risk free interest rate (1) |
|
0.04% - 0.25% |
|
|
0.25% |
|
|
0.05% - 0.25% |
|
Expected dividend yield (2) |
|
0.00% |
|
|
0.00% |
|
|
0.00% |
|
Expected volatility (3) |
|
61.54% - 105% |
|
|
119.11% - 125.57% |
|
|
53.91% - 126.85% |
|
Expected exercise term in
years (4) |
|
0.25 - 1.00 |
|
|
0.75 |
|
|
0.08 - 1.00 |
|
|
(1) |
The risk –free interest rate was determined by management using the one month Treasury bill yield as of the valuation dates. |
|
|
|
|
(2) |
The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. |
|
|
|
|
(3) |
The volatility was determined by referring to the average historical volatility of a peer group of public companies because we do not have sufficient trade history to determine our historical volatility. |
|
|
|
|
(4) |
The exercise term is the remaining contractual term of the convertible instrument at the valuation date. |
The change in fair values of the derivative liabilities related to the Convertible Notes for the three months ended March 31, 2015 is summarized as:
Fair value of
derivatives December 31, 2014 |
$ |
1,256,159 |
|
New issuances |
|
317,786 |
|
Conversion of derivative
liabilities |
|
(251,597 |
) |
Change in fair value of derivative liabilities |
|
352,807 |
|
Fair value of derivative
liabilities at March 31, 2015 |
$ |
1,675,155 |
|
NOTE 7 EQUITY TRANSACTIONS
During the three months ended March 31, 2015, the Company issued 40,591,051 shares of common stock for the conversion of notes payable and accrued interests in the amount of $234,355. The Company also recorded $251,597 as increase in additional paid-in capital from derivative liability as a result of the conversions.
NOTE 8 SUBSEQUENT EVENTS
Subsequent to March 31, 2015, the Company issued 24,164,070 shares for conversion $52,000 of convertible notes and payable accrued interests.
On April 9, 2015, the Company amended its Articles of Incorporation to increase the Company’s authorized shares of Common Stock from 1,000,000,000 to 2,000,000,000.
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion should be read in conjunction with our
consolidated financial statements and notes thereto included elsewhere in this
Quarterly Report on Form 10-Q. Forward looking statements are statements not
based on historical information and which relate to future operations,
strategies, financial results or other developments. Forward-looking statements
are based upon estimates, forecasts, and assumptions that are inherently subject
to significant business, economic and competitive uncertainties and
contingencies, many of which are beyond our control and many of which, with
respect to future business decisions, are subject to change. These uncertainties
and contingencies can affect actual results and could cause actual results to
differ materially from those expressed in any forward-looking statements made by
us, or on our behalf. We disclaim any obligation to update forward-looking
statements.
Overview
World Moto, Inc. was incorporated on March 24, 2008, in the
State of Nevada under the name Net Profits Ten Inc. On November 8, 2012, we
amended our Articles of Incorporation to increase our authorized shares of
common stock from 100,000,000 to 500,000,000 and our board of directors approved
a stock dividend of 180 shares of common stock of the Company for each share of
common stock issued and outstanding. Additionally, on November 12, 2012, we
amended our Articles of Incorporation to change our name from Net Profits Ten
Inc. to World Moto, Inc., which name change became effective on November 15,
2012, upon approval from the Financial Industry Regulatory Authority (FINRA).
On January 18, 2014, we amended our Articles of Incorporation to increase our
authorized shares of common stock from 500,000,000 to 1,000,000,000. On April 9,
2015, we further amended our Articles of Incorporation to increase our authorized
shares of common stock from 1,000,000,000 to 2,000,000,000.
On September 1, 2012, we entered in an Asset Purchase Agreement
(Agreement) with World Moto (Thailand) Co., Ltd., a corporation established
under the laws of the Kingdom of Thailand (Old WM), Chris Ziomkowski, the
Chief Technical Officer of Old WM and Paul Giles, the Chief Executive Officer of
Old WM. The Agreement was consummated on November 14, 2012. We purchased from
Old WM substantially all of the intellectual property and certain other specific
intellectual property assets related to Old WMs initial product, the Moto-Meter
(the Assets), which includes three United States patent applications, the data
related to the patent applications, certain software related to the operation of
the Moto-Meter, several URLs and trade-names and associated names related to the
Moto-Meter and Old WM.
On January 30, 2013, we established two wholly owned
subsidiaries that were incorporated in the State of Nevada. World Moto
Technologies, Inc. and World Moto Holdings, Inc. were both established, but have
no activity to report to date. On February 4, 2013, World Moto Technologies Ltd.
was organized under the laws of the Kingdom of Thailand. The name was later
changed to World Moto Co., Ltd. (WM Co. Thailand). WM Co. Thailand is owned in
its entirety by World Moto, Inc., World Moto Technologies, Inc. and World Moto
Holdings, Inc. and represents our operating entity for the purposes of research
and development in the Southeast Asia region.
As of March 31, 2015, WM Co. Thailand had 12 employees. WM Co.
Thailand has been performing extensive research and development activities since
its inception related to improving the Moto-Meter design to allow for higher
yields in mass production, as well as substantial work on the Wheelies product.
Business Overview
Plan of Operations
We plan to establish ourselves as a company that designs,
manufactures, markets and sells the Moto-Meter products, which are devices that
provide moto-taxi fare metering and other communication capabilities. We
currently have patent applications pending for our products in 56 countries. To
achieve our objective, we have established our operational subsidiary in
Thailand for product development and a presence in two additional potential
markets, Brazil and Nigeria, and begun expanding our work force to be able to
implement our business plan.
The Moto-Meter is in the verification build stage and the
pre-production phase has been completed in Thailand. We anticipate expanding to
Indonesia, and Vietnam during the second quarter of 2015 and in Brazil within
the next 12 months. We will be outsourcing mass production for the Moto-Meter to
a third party manufacturer in the coming weeks.
In conjunction with the opening of sales for the Moto Meter, we
launched the App, which is a smartphone application. The App connects directly
to the Moto-Meter via a secure Bluetooth connection, and can access data from
the meter in real-time, giving users the ability to view ratings and a profile
of the driver before getting on the bike.
As an element of mobile commerce, we have introduced Yes, a
concierge service where persons can order products and have the products
delivered to their address by motor scooter. The Yes service has been going
through testing and was launched on March 9, 2015 in Bangkok, Thailand. We
expect Yes to go live in in the third quarter of 2015 in Kuala Lumpur, Malaysia.
We also intend to launch Yes over the next 12 months in Cambodia.
We have procured our first customer for Wheelies in Thailand.
We are focused on the development of Wheelies as a unique advertising product,
which displays static and streaming media on the wheels of motorcycles and
automobiles, providing a new mobile medium for advertising, broadcasting,
self-expression and publishing. We have successfully completed a pre-production
version of Wheelies and have successfully completed testing. We are currently in
negotiations for an exclusive advertising arrangement on the Wheelies product.
In Thailand, we entered into a distribution agreement with
Lucky Distributors, Ltd. (Lucky). Under the terms of this distribution
agreement, Lucky has the non-exclusive right to distribute, sell and service the
Moto-Meter and Moto-Meter accessories throughout Thailand and the surrounding
border markets. Lucky is a national distribution company based in Thailand. It
is also a preferred supplier for the Motorcycle Taxi Association of Thailand. We
believe Luckys reputation and relationship with the moto taxi community will
help promote Moto-Meter in Thailand.
On October 30, 2013, we announced the signing of multiple
letters of intent for the distribution of our flagship product, the Moto-Meter.
To date, we signed letters of intent with qualified distributors in 7 countries.
The distributors were selected for their ability to both sell and support our
products as well as to protect our brand image in strategic markets. We are
continuing discussions with dozens of further prominent distributors out of the
hundreds of retail agents and operators that have contacted us expressing
interest in the Moto-Meter and associated products. The letters of intent
include authorizations to sell and support our flagship product, the Moto-Meter,
as well as establishing priority for Wheelies and our other future products and
services.
On December 2, 2013, World Moto Co. Thailand entered into a
Purchase and Licensing Agreement (the PL Agreement) with Mobile Advertising
Ventures Ltd. (MAV). Pursuant to the terms of the PL Agreement, MAV will
purchase 10 initial Wheelies from World Moto Co. Thailand at a purchase price
of $35,000, and will have an option to purchase an additional 190 Wheelies at a
purchase price of $3,500 per unit. World Moto Co. Thailand also grants a
non-exclusive license to MAV for the use of its software in connection with the
operation of the Wheelies in consideration for a fee based on net revenue per
quarter from advertising sales relating to the use of the Wheelies. This sale
will be completed during 2015.
We entered into discussions to mandate the use of Moto-Meters
on all moto taxis within the city of Montes Claros, Brazil. Montes Claros is
considered the "motorcycle taxi capital" of northern Brazil and an ideal city to
launch the Moto-Meter in Brazil. We anticipate that a regulatory mandate here
will act as a springboard into the potentially larger markets of Brazil's other
highly populated cities.
In Africa, we established an office in Lagos, Nigeria.
Previously, the officials in Nigeria have expressed strong interest in the
Moto-Meter, and feedback from our initial discussions has been positive.
Establishing a physical presence in the city is now essential for us as we enter
the process of formalizing these discussions into a clear plan to introduce the
Moto-Meter into Lagos and cities across Africa. On November 4, 2013, we were
awarded a patent on the Moto-Meter technology until 2033 in Nigeria, a country
with more than 3 million motorcycle taxis.
We have assembled an optimal number of employees, including
experienced engineers in our research and development division at the Thailand
Science Park. The development focus is simultaneously devoted to our advertising
product, Wheelies, as well as our flagship product, the Moto-Meter.
In parallel with this, we have completed the work to adapt the
Moto-Meter electronics so that it can pass all current and anticipated
regulatory requirements of INMETRO, the National Institute of Metrology for
Brazil, as well as other international regulatory agencies.
Additional work is currently being undertaken to improve the
weatherization technology used in the Moto-Meter to enhance its ability to
withstand environmental stresses, as well as work to provide a more generic
Moto-Meter installation kit and wiring harness that will allow its installation
into a wider variety of vehicles, such as auto rickshaws.
We plan to use outside consultants and service companies from
time to time for various tasks in the sales, development and manufacturing of
our products and product launch and distribution, under provider contracts, to
the extent that we are not able to perform the required functions. Using such
outside vendors may make a particular task more expensive, but we believe that
using such experts should improve the outcome or speed up the timing of product
development and time to market. There is no assurance that we will be able to
control the costs and deliveries of such activities in the same manner as if we
were performing the tasks ourselves, and therefore we are subject to the usual
risks of using outside providers.
Estimated Expenses
The following provides an overview of our estimated expenses to
fund our plan of operations for each of our products over the next 12 months.
Funding will be with our current cash assets and may include future capital that
we may have to raise.
Moto-Meter
|
|
Estimated |
|
Expenses |
|
Description |
|
|
|
|
|
Engineering |
$ |
120,000
|
|
Additional Prototyping and Mechanical
Construction |
$ |
15,000 |
|
Initial Sales Training and
Support |
$ |
10,000 |
|
Production Tooling and NRE Charges |
$ |
50,000 |
|
Development of Production
Test Fixtures |
$ |
50,000 |
|
Licensing and Certification |
$ |
20,000 |
|
Components for Initial
Production |
$ |
65,000 |
|
Training and Equipment |
$ |
45,000 |
|
|
|
|
|
Total |
$ |
375,000 |
|
Wheelies
|
|
Estimated |
|
Description |
|
Expenses |
|
|
|
|
|
Establish Production and
Support |
$ |
35,000 |
|
Warranty Service |
$ |
5,000 |
|
|
|
|
|
Total |
$ |
40,000 |
|
Yes
|
|
Estimated |
|
Description |
|
Expenses |
|
|
|
|
|
Continued Development of
Handset Application |
$ |
50,000 |
|
Continued Development of Agent Handset
Application |
$ |
50,000 |
|
Establishment of Customer
Service Center |
$ |
5,000 |
|
Initial Awareness Campaign |
$ |
35,000 |
|
|
|
|
|
Total |
$ |
140,000 |
|
In order to execute on our plan of operations over the next 12
months, we will need to raise additional of working capital through debt
or equity offerings. There are no assurances that we will be able to raise the
required working capital on terms favorable, or that such working capital will
be available on any terms when needed. Any failure to secure additional
financing may force us to modify or delay our business plan.
Results of Operations
Comparison of three-month periods ended March 31, 2015 and
2014
Revenue
We have generated no revenues for the three month periods ended
March 31, 2015 and 2014.
Expenses
General and administration expenses for the three-month period ended March 31, 2015, amounted to $99,249, compared to $139,011
during the three-month period ended March 31, 2014. The Company incurred less operating expense during 2015.
R&D expenses for the three-month period ended March 31, 2015, amounted to $102,825, compared to $121,106 during the three-month period ended March 31, 2014. The Company’s R&D department in Thailand had less expenses incurred during 2015.
Other expense for the three-months period ended March 31, 2015 amounted to $675,907, compared to $134 during the three-month period ended March 31, 2014. The increase is primarily due to the increase in interest expense and loss on the fair value of the derivatives.
Net Loss
For the three-month period ended March 31, 2015, we incurred a net loss of $877,981, compared to a net loss of $260,251 for the three-month period ended March 31, 2014. The increase is primarily due to the increase in interest expense and loss on the fair value of the derivatives.
Liquidity and Capital Resources
As of March 31, 2015, we have $153,463 in current assets and $2,184,830 in current liabilities. Our total assets were $203,029 and our total liabilities were $2,184,830. We had $113,323 in cash and our working capital deficit was $2,031,367.
Cash Flows:
|
|
For the three
months ended |
|
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
Cash Flows from Operating
Activities |
$ |
(192,516 |
)
|
$ |
(144,351 |
)
|
Cash Flows from Investing Activities |
|
- |
|
|
(873 |
) |
Cash Flows from Financing
Activities |
|
137,023 |
|
|
- |
|
Effects of Currency Translations |
|
(449 |
) |
|
(2,511 |
) |
Net decrease in
cash |
$ |
(55,942 |
)
|
$ |
(147,735 |
)
|
On March 5, 2015, we entered into a Securities Purchase Agreement with an institutional investor pursuant to which we issued a convertible debenture in the principal and interest amount of $60,870 for a purchase price of $50,000 (8% original issue discount). Upon the effectiveness of a registration statement to be filed by the Company in connection therewith, such investor will purchase an additional convertible debenture in the principal amount of $489,130 for a purchase price of $450,000 (8% original issue discount), for a total aggregate principal amount of $543,478 for a purchase price of $500,000.
On March 26, 2015, the Company completed an offering by entering into a Securities Purchase Agreement with Macallan Partners for an aggregate principal and interest amount of 112,000 (the “Purchase Price”) with a $12,000 OID and $7,500 in Deferred Financing Costs-Broker Fees in the form of a convertible note.
Given our cash position of $31,220 as of May 19, 2015, and the proceeds from the equity financings, management believes that our cash on hand and working capital are sufficient to meet our current anticipated cash requirements through May 31, 2015.
We have incurred an accumulated loss of $4,343,761 since inception. Our independent auditors have issued an audit opinion for our financial statements for the periods ended December 31, 2014 and 2013, which includes a statement expressing substantial doubt as to our ability to continue as a going concern due to our limited liquidity and our lack of revenues.
Our current cash requirements are significant due to planned development and marketing of our current products, and we anticipate generating losses. We planned to obtain $556,000 which will allow us to execute on our business strategy over the next 12 months, commensurate with the goals for our planned marketing, development and distribution efforts – we are actually targeting an additional $1,000,000 over the next 12 months in additional working capital in order to increase our growth plans on an expedited basis.
Our management believes that we should be able to raise
sufficient amounts of working capital through debt or equity offerings, as may
be required to meet our short-term obligations. However, the incurrence of
indebtedness would result in increased debt service obligations and could
require us to agree to operating and financial covenants that would restrict our
operations. Additionally, our ability to raise additional capital may be limited
due to the grant of a security interest on all of the assets of the Company to
secure the obligations under the convertible debentures issued on April 4, 2014
and the convertible debenture issued on March 5, 2015. Changes in our operating
plans, increased expenses, acquisitions, or other events, may cause us to seek
additional equity or debt financing in the future. We anticipate continued and
additional marketing, development and distribution expenses. Accordingly, we
expect to continue to use debt and equity financing to fund operations for the
next twelve months, as we look to expand our asset base and fund marketing,
development and distribution of our products.
There are no assurances that we will be able to raise the
required working capital on terms favorable, or that such working capital will
be available on any terms when needed. Any failure to secure additional
financing may force us to modify our business plan. In addition, we cannot be
assured of profitability in the future.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles of the United States (GAAP) requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the year. The more significant areas requiring the use of
estimates include asset impairment, stock-based compensation, and future income
tax amounts. Management bases its estimates on historical experience and on
other assumptions considered to be reasonable under the circumstances. However,
actual results may differ from the estimates.
We believe the following is among the most critical accounting
policies that impact or consolidated financial statement. We suggest that our
significant accounting policies, as described in our financial statements in the
Summary of Significant Accounting Policies, be read in conjunction with this
Managements Discussion and Analysis of Financial Condition and Results of
Operations.
Foreign Currency Translation
The functional currency of our subsidiary is the Thai Baht.
Monetary assets and liabilities denominated in currencies other than the
functional currency are translated into the functional currency at rates of
exchange prevailing at the balance sheet dates. Transactions denominated in
currencies other than the functional currency are translated into the functional
currency at the exchange rates prevailing at the dates of the transaction.
Exchange gains or losses arising from foreign currency transactions are included
in the determination of net income (loss) for the respective periods.
For financial reporting purposes, the financial statements of
the subsidiary are translated into the Companys reporting currency, United
States Dollars (USD). Asset and liability accounts are translated using the
closing exchange rate in effect at the balance sheet date, equity account and
dividend are translated using historical exchange rates and income and expense
accounts are translated using the average exchange rate prevailing during the
reporting period.
Adjustments resulting from the translation, if any, are
included in accumulated other comprehensive income (loss) in stockholders
equity (deficit).
Revenue Recognition
The Company recognizes revenue only when all of the following
criteria have been met:
|
Persuasive evidence of an arrangement exists;
|
|
Delivery has occurred or services have been
rendered; |
|
The fee for the arrangement is fixed or
determinable; and |
|
Collectibility is reasonably assured.
|
Persuasive Evidence of an Arrangement - The Company documents all terms of an arrangement in a written contract signed by the customer prior to recognizing revenue.
Delivery Has Occurred or Services Have Been Performed - The
Company performs all services or delivers all products prior to recognizing
revenue. Monthly services are considered to be performed ratably over the term
of the arrangement. Professional consulting services are considered to be
performed when the services are complete. Equipment is considered delivered upon
delivery to a customers designated location.
The Fee for the Arrangement Is Fixed or Determinable - Prior to
recognizing revenue, a customers fee is either fixed or determinable under the
terms of the written contract. Fees for most monthly services, professional
consulting services, and equipment sales and rentals are fixed under the terms
of the written contract. Fees for certain monthly services, including certain
portions of networking, storage, and content distribution and caching services,
are variable based on an objectively determinable factor such as usage. Those
factors are included in the written contract such that the customers fee is
determinable. The customers fee is negotiated at the outset of the arrangement
and is not subject to refund or adjustment during the initial term of the
arrangement.
Collectibility Is Reasonably Assured - The Company determines
that collectibility is reasonably assured prior to recognizing revenue.
Collectibility is assessed on a customer by customer basis based on criteria
outlined by management. New customers are subject to a credit review process,
which evaluates the customers financial position and ultimately its ability to
pay. The Company does not enter into arrangements unless collectibility is
reasonably assured at the outset. Existing customers are subject to ongoing
credit evaluations based on payment history and other factors. If it is
determined during the arrangement that collectibility is not reasonably assured,
revenue is recognized on a cash basis.
Franchise Fee Revenue
Revenues from licensees include a royalty based on a percent of
sales, and may include initial fees. Continuing royalties are recognized in the
period earned. Initial fees are recognized upon granting of a new franchise
term, which is when the Company has performed substantially all initial services
required by the franchise arrangement. Additionally, the first twelve months of
operations are royalty free for the franchisee.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that
information required to be disclosed in the reports filed or submitted under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported, within the time period specified in the Securities and Exchange
Commissions rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in the reports filed under the Exchange Act is
accumulated and communicated to our management, including our Chief Executive
Officer (our principal executive officer) and our Chief Financial Officer (our
principal financial officer and principal accounting officer) to allow for
timely decisions regarding required disclosure.
As of the quarterly period ended March 31, 2015, we carried out
an evaluation, under the supervision and with the participation of our principal
executive officer and our principal financial officer, of the effectiveness of
the design and operation of our disclosure controls and procedures. Based on the
foregoing, our principal executive officer and our principal financial officer
concluded that our disclosure controls and procedures were not effective as of
the quarterly period ended March 31, 2015 in ensuring that information required
to be disclosed by us in reports that we file or submit under the Exchange Act
is recorded, processed, summarized, and reported within the time periods
specified in the Securities and Exchange Commissions (the SEC) rules and
forms. This conclusion is based on findings that constituted material
weaknesses. A material weakness is a deficiency, or a combination of control
deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of the Companys interim
financial statements will not be prevented or detected on a timely basis.
In performing the above-referenced assessment, our management
identified the following material weaknesses:
|
i) |
We have insufficient quantity of dedicated resources and
experienced personnel involved in reviewing and designing internal
controls. As a result, a material misstatement of the interim and annual
financial statements could occur and not be prevented or detected on a
timely basis. |
|
ii) |
We do not have an audit committee. While not being
legally obligated to have an audit committee, it is the managements view
that to have an audit committee, comprised of independent board members,
is an important entity-level control over our financial
statements. |
|
|
|
|
iii) |
We did not perform an entity level risk assessment to
evaluate the implication of relevant risks on financial reporting,
including the impact of potential fraud-related risks and the risks
related to non-routine transactions, if any, on our internal control over
financial reporting. Lack of an entity-level risk assessment constituted
an internal control design deficiency which resulted in more than a remote
likelihood that a material error would not have been prevented or
detected, and constituted a material weakness. |
Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and a
functioning Chief Financial Officer, does not expect that our disclosure
controls and internal controls will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of a simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management or board override
of the control.
The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal controls over financial
reporting that occurred during the quarterly period ended March 31, 2015 that
have materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
On March 26, 2015, we entered into a convertible promissory note with Macallan Partners for the principal amount of $112,000 for a purchase price of $100,000.
The issuance of the convertible promissory note was exempt from
the registration requirements of the Securities Act pursuant to the exemption
for transactions by an issuer not involved in any public offering under Section
4(a)(2) of the Securities Act and Rule 506 of Regulation D.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits.
Exhibit |
Description |
No. |
|
3.1 |
Articles of Incorporation
(incorporated by reference to our Annual Report on Form 10-K filed on
April 16, 2015). |
3.2 |
By-laws (incorporated by reference to our
Registration Statement on Form S-1, as filed with the SEC on June 25,
2010). |
10.1 |
Securities Purchase Agreement, dated March 5, 2015,
between the Company and Redwood Management, LLC (incorporated by reference
to our Current Report on Form 8-K filed on March 11, 2015) |
10.2* |
Convertible Promissory Note, dated March 26,
2015, between the Company and Macallan Partners, LLC |
31.1* |
Certification of Chief
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
31.2* |
Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1* |
Certification of Chief
Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
32.2* |
Certification of Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101 * |
Interactive Data Files
|
* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
|
WORLD MOTO, INC. |
|
|
|
Dated: May 20, 2015 |
By: |
/s/ Paul Giles |
|
|
Paul Giles |
|
|
Chief Executive Officer (Principal Executive Officer) |
|
|
|
Dated: May 20, 2015 |
By: |
/s/
Lisa Ziomkowski-Boten |
|
|
Lisa Ziomkowski-Boten |
|
|
Treasurer (Principal Financial Officer and
Principal |
|
|
Accounting Officer) |
WORLD MOTO, INC
CONVERTIBLE DEBENTURE
$112,000.00 |
March 26, 2015 |
THIS DEBENTURE HAS NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAW AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AS TO THIS DEBENTURE OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
FOR VALUE RECEIVED, the undersigned, World Moto,
Inc, a Nevada corporation (the "Company" or the Borrower), hereby promises to
pay to Macallan Partners, LLC (the "Lender"), or its registered assigns, the
principal sum of ONE HUNDRED TWELVE THOUSAND dollars ($112,000.00) subject to an
approximate Original Issue Discount of 10.71% for an aggregate purchase price of
$100,000.00, together with interest (computed on the basis of a three hundred
sixty (360) day year of twelve (12) thirty (30) day months) on the unpaid
principal balance of this Debenture from the date of this Debenture until paid,
at the rate of Ten percent (10%) per annum.
1. PAYMENT.
(a)
Payments of the principal of and interest on this Debenture shall be made in
lawful money of the United States of America at the current address of the
registered holder of this Debenture as recorded in the Companys books. Payments
shall be made by mandatory conversion, unless this Debenture is prepaid at the
Companys option in accordance with Section 1(c) or unless there is a default in
accordance with Section 5(b).
(b)
Interest accruing on the outstanding principal balance of this Debenture during
the term of this Debenture shall be paid at the Maturity Date, which shall be
September 30, 2015. Upon the occurrence of any Event of Default (as such
term is defined hereinafter) and acceleration of the indebtedness hereunder, or
after the Maturity Date (including without limitation any time from and after
the entry of a judgment for sums due), any unpaid principal of this Debenture
shall bear interest at the rate of eighteen percent (18%) per annum until paid.
There shall be a 10 day grace period for payments to be made hereunder (but
interest shall be computed to the actual date of payment).
(c)
The outstanding principal balance of this Debenture, together with all accrued
but unpaid interest thereon, may be prepaid, at the Company's option at any time
prior to the Maturity Date, provided that the Company shall give written notice
of any such prepayment to the registered holder of this Debenture no later than
ten (10) business days prior to the date the Company intends to make a
prepayment (the Prepayment Date). Such amount must be paid in cash on or
before the next business day following the expiration of the 10 business day
notice period. Notwithstanding the Companys notification of prepayment, the
Lender may still convert any remaining balance of this
Debenture pursuant to its terms until full prepayment has occurred. Upon the
Prepayment Date the Company shall pay a prepayment penalty on the outstanding
principal balance plus all accrued and unpaid interest thereon and any
applicable fees and expenses (the Prepayment Penalty). Upon the Prepayment
Date the Company shall pay a prepayment penalty based upon the following
schedule: If prepayment is made within 60 days from the date of this Debenture
then 125% of the outstanding principal balance plus all accrued and unpaid
interest thereon will be due, if prepayment is made between 61-120 days from the
date of this Debenture then 135% of the outstanding principal balance plus all
accrued and unpaid interest thereon will be due, if prepayment is made between
121 days from the date of this Debenture and the maturity date then 150% of the
outstanding principal balance plus all accrued and unpaid interest thereon will
be due (the Prepayment).
1
2. REGISTRATION AND TRANSFER.
(a)
The Company shall maintain at its principal executive offices a register for
this Debenture, in which the Company shall record the name and address of the
person in whose name this Debenture has been issued and the name and address of
each transferee and prior owner thereof. The Company may deem and treat the
person in whose name this Debenture is so registered as the holder and owner
thereof for all purposes and all notices hereunder to the registered holder may
be to the address indicated on such register.
(b)
This Debenture may be transferred only by the surrendering thereof for
registration of transfer duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the registered holder. The Company may condition
its registration of such transfer upon (a) the opinion of counsel reasonably
acceptable to the Company that the transfer of this Debenture does not violate
the Act or any state securities or blue sky laws, and (b) the payment to it of a
sum sufficient to cover any stamp tax or other governmental charge imposed in
respect of such transfer.
3. COMMON STOCK CONVERSION RIGHTS AND
SHARE RESERVATION RIGHTS.
(a)
The Lender has the right, at any time after the date of this debenture, at its
election, to convert all or part of the outstanding and unpaid principal sum and
accrued interest (and any other fees) on this Debenture, into fully paid and
non-assessable shares of common stock of the Company as per the following
conversion formula: Number of shares receivable upon conversion equals the
dollar conversion amount divided by the Conversion Price. The Conversion
Price is equal to: 60% of the lowest traded price during the 20 trading days
prior to the election to convert. If the Companys common stock price closes
below 0.002 at any time while this Debenture is outstanding then an additional
15% discount will apply to the conversion price. However, if the Companys
common stock price at any time loses the bid (ex: .0001 on the ask with zero
market makers on the bid as per level 2 quotations), then the conversion price
may, in the Lenders sole and absolute discretion, be reduced to a fixed price
of .00001. Notice of Lenders conversion may be delivered to Borrower by method
of Lenders choice (including but not limited to email, facsimile, mail,
overnight courier, or personal delivery), and all conversions shall be cashless
and not require further payment from the Lender. If no objection is delivered
from Borrower to Lender regarding calculations in the conversion notice within 24 hours of
delivery of the conversion notice, the Company shall have been thereafter deemed
to have irrevocably confirmed and irrevocably ratified such conversion notice
and waived any objection thereto. The Company shall deliver the shares from any
conversion to Lender (in any name directed by Lender) within 2 (two) business
days of conversion notice delivery. At no time will the lender convert any
amount of the Debenture into common stock that would result in the lender owning
more than 4.99% of the companys common stock outstanding.
2
(b)
The obligations of the Borrower under this Debenture shall be secured by shares
of the common stock of the Company, assigned to a reserve to be administered by
the Companys Transfer Agent, for the benefit of the Lender. The Borrower shall
irrevocably place 85,000,000 shares of the Companys common stock on
reserve with the Companys Transfer Agent to ensure that there are sufficient
shares available for the conversion of this Debenture. So long as any portion of
the Debenture(s) is outstanding, the Company shall take all action necessary to
reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Debenture(s), a number
of shares of Common Stock equal to, at minimum, 4 times (4x) the value of the
outstanding principal and interest of the Debenture(s) as shall from time to
time be necessary to effect the conversion of all of the Debenture(s) then
outstanding (without regard to any limitations on conversions) (the
Required Reserve Amount).
(c)
Insufficient Authorized Shares. If, notwithstanding Section 3(b), and not
in limitation thereof, at any time while any of the Debenture(s) remain
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon conversion of the Debenture(s) at least a number of shares of
Common Stock equal to the Required Reserve Amount (an Authorized Share
Failure), then the Company shall immediately take all action necessary
to increase the Companys authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for the
Debenture(s) then outstanding. Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence of an
Authorized Share Failure, but in no event later than thirty (30) days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of
its stockholders for the approval of an increase in the number of authorized
shares of Common Stock. In connection with such meeting, the Company shall
provide each stockholder with a proxy statement and shall use its reasonable
best efforts to solicit its stockholders approval of such increase in
authorized shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such proposal.
(d)
In the event that the outstanding shares of the common stock subject to the
conversion are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company by reason of merger,
consolidation, re-capitalization, re-classification, stock split, stock dividend
or combination of shares, the Company shall make an appropriate and equitable
adjustment in the number and kind of shares as to which the conversion shall be
applicable, to the end that after such event the Lenders proportionate interest
is preserved after the occurrence of such event.
3
(e)
If Borrower fails to deliver shares in accordance with the timeframe stated this
Section; the Lender, at any time prior to selling all of those shares, may
rescind any portion, in whole or in part, of that particular conversion
attributable to the unsold shares and have the rescinded conversion amount
returned to the Principal Sum with the rescinded conversion shares returned to
the Company (under Lenders and Borrowers expectations that any returned
conversion amounts will tack back to the original date of this Debenture). In
addition, for each conversion, in the event that shares are not delivered by the
fourth business day (inclusive of the day of conversion), a penalty of $2,000
per day will be assessed for each day after the third business day (inclusive of
the day of the conversion) until share delivery is made; and such penalty will
be added to the Principal Sum of this Debenture (under Lenders and Borrowers
expectations that any penalty amounts will tack back to the original date of
this Debenture).
4. ADJUSTMENT FOR CAPITAL CHANGES;
MERGER OR CONSOLIDATION; NON-DILUTION PROVISIONS.
(a)
If the Company declares or pays a dividend on its common stock payable in common
stock, or other securities, subdivides the outstanding common stock into a
greater amount of common stock, or engages in any reclassification, exchange or
substitution transaction (an Event), then the conversion price shall be
automatically adjusted to provide the Lender with the same percentage ownership
in the Stock of the Company that it would have had if the conversion had been
accomplished immediately prior to the Event.
(b)
If any merger or consolidation of the Company or the sale of all or
substantially all of its assets shall occur, then, as a condition to such
merger, consolidation or sale, lawful and adequate provision shall be made
whereby the registered holder of this Debenture shall thereafter have the right
to receive upon the basis and upon the terms and conditions specified herein
(including, without limitation, payment of the applicable Conversion Price) and
in lieu of the shares of Common Stock of the Company immediately theretofore
receivable upon conversion of this Debenture, such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for such
shares of Common Stock immediately theretofore receivable by such holder had
such merger or consolidation not taken place. The Company shall not affect any
such consolidation or merger, unless prior to or simultaneously with the
consummation thereof, the successor (if other than the Company) resulting from
such consolidation or merger shall assume, by written instrument executed and
delivered to the holder, the obligation to deliver to the holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to receive.
(c)
The Company will at all times reserve and keep available out of its authorized
Common Stock, for the purpose of issuance upon conversion of this Debenture as
herein provided, the maximum number of shares of Common Stock as shall then be
issuable upon the exercise of the conversion privileges set forth herein. The
Company covenants that all shares which shall be so issuable shall, upon the
conversion of this Debenture as herein provided, be duly and validly issued and
fully paid and nonassessable by the Company.
5. EVENTS OF DEFAULT.
4
(a)
The following shall constitute an event of default (an Event of Default):
(i) the Company shall fail
to pay any principal under this Debenture when due and payable (or payable by
conversion) thereunder; or
(ii) the Company shall fail to pay any
interest or any other amount under this Debenture when due and payable (or
payable by conversion) thereunder; or
(iii) a receiver, trustee or other
similar official shall be appointed over the Company or a material part of its
assets and such appointment shall remain uncontested for twenty (20) days or
shall not be dismissed or discharged within sixty (60) days; or
(iv) the Company shall become insolvent
or generally fails to pay, or admits in writing its inability to pay, its debts
as they become due, subject to applicable grace periods, if any; or
(v) the Company shall make a general
assignment for the benefit of creditors; or
(vi) the Company shall file a petition
for relief under any bankruptcy, insolvency or similar law (domestic or
foreign); or (vii) an involuntary insolvency proceeding shall be commenced or
filed against the Company; or
(viii) the Company shall lose its
status as DTC Eligible or the Companys shareholders shall lose the ability to
deposit (either electronically or by physical certificates, or otherwise) shares
into the DTC System; or
(ix) the Company shall become
delinquent in its filing requirements as a fully-reporting issuer registered
with the SEC or otherwise causing a class of the Companys equity securities to
become eligible for termination of registration pursuant to Section 12(g)(4) of
the Securities Exchange Act of 1934, as amended; or
(x)
the Company shall fail to maintain the Required Reserve Amount as set forth in
Section 3(b) or shall otherwise fail to maintain sufficient common shares
authorized and available to satisfy the lenders conversions for as long as this
Debenture remains unpaid in whole or in part (It is understood and agreed
between the Lender and the Company that the Company currently does not have
sufficient authorized shares to establish the Required Reserve Amount for the
benefit of the Lender that the Company has 30 days from the date of this
debenture to establish the Required Reserve Amount).
(xi)
the Company shall fail to maintain communication with Lender or shall fail to
update its contact information with Lender or shall otherwise ignore the
Lenders attempts at communication.
5
(xii)
the Company shall fail to maintain a listing on the OTC Markets exchange or any
higher tier exchange or shall otherwise fail to maintain a minimum bid quotation
of .0001 (no bid).
(b)
Upon the occurrence of an Event of Default, the Lender may declare by written
notice all the then unpaid principal and interest outstanding, as well as any
applicable penalties, fees and a penalty of 150% of the unpaid principal balance
to be due and payable, without presentation, demand, protest or notice of
dishonor, all of which the Company hereby waives. Interest accruing after an
Event of Default shall accrue at an interest rate equal to the lesser of 18% per
annum or the maximum rate permitted under applicable law. Nothing herein shall
limit Lenders right to pursue any other remedies available to it at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Companys failure to timely deliver
certificates representing shares of Common Stock upon conversion of this
Debenture as required pursuant to the terms hereof.
(c)
At any time that the Company is in default of its obligations under this
Debenture, the Company shall not take the following actions without written
consent of the Lender:
(i) Engage in any merger,
sale or other transaction not in the ordinary course of business; or
(ii)
Incur Indebtedness exceeding two times (2x) the outstanding principal, interest,
and all other applicable fees and penalties owed on this Debenture unless said
indebtedness will be incurred to pay off this Debenture; or
(iii)
Make any payment, including salaries, to any stockholder or affiliate of the
Company; or
(iv)
Make any changes to the bylaws or certificate of incorporation of the
Company; or
(v) Declare or pay any
dividend in cash, stock or other property; or
(vi)
Make any payment on any other unsecured debt obligation of the Company; or
(vii) Issue any additional stock of
any kind of the Company
(d)
Should the indebtedness represented by this Debenture or any part thereof be
collected in any proceeding or placed in the hands of attorneys for collection,
the Company agrees to pay, in addition to the principal and interest due and
payable hereon, all costs of collecting this Debenture, including reasonable
attorneys' fees and expenses.
6
6. NEGATIVE COVENANTS.
(a)
For so long as the Lender or any of its affiliates hold any unpaid portion of
this Debenture, the Company and its affiliates are prohibited from, among other
things, voting any securities of Companys Corporation, in favor of:
(i) An extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving Company or any of its subsidiaries,
(ii) A sale or transfer of a
material amount of Companys assets or its subsidiaries assets,
(iii) Intentionally Left Blank
(iv) Any other material change in
Companys business or corporate structure,
(v) Intentionally Left
Blank
(vi) Causing a class of
Companys securities to be delisted from a national securities association,
(vii) Causing a class of Companys
equity securities to become eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934, as amended,
(viii) Terminating Companys transfer agent
without finding a suitable replacement transfer agent,
(ix) Taking any action which
would impeded the purposes and objects of this Debenture,
(x) Taking any action,
intention, plan or arrangement similar to any of those enumerated above.
7. MISCELLANEOUS.
(a)
If the date of any payment required by this Debenture be Saturday, Sunday or a
bank holiday, such payment shall be payable on the first business day following
such date.
(b)
The Company hereby expressly waives presentment, demand, protest or any other
notice whatsoever.
(c) Intentionally Left Blank
(d) This Debenture shall be binding
upon and shall inure to the benefit of the parties hereto, their successors,
heirs and assigns.
7
(e) The invalidity or partial
invalidity of any provision of this Debenture shall affect only such provision
or part thereof and the balance of this Debenture shall remain in effect.
(f) The Company shall file a Form 8-K
with the SEC disclosing this Debenture and all of its terms within the timeframe
mandated by the Commission.
(g) It is understood and agreed that
no failure or delay in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any right,
power or privilege hereunder.
8. TERMS OF FUTURE FINANCINGS.
(a)
So long as the Debenture is outstanding, upon any issuance by the Company or any
of its subsidiaries of any security with any term more favorable to the holder
of such security or with a term in favor of the holder of such security that was
not similarly provided to the Lender in the Debenture, then the Company shall
notify the Lender of such additional or more favorable term(s) and such term(s),
at the Lenders option, shall become a part of the terms contained herein this
Debenture. The types of terms contained in another security that may be more
favorable to the holder of such security include but are not limited to: terms
addressing conversion discounts and terms addressing transfer agent reserve
shares.
9. INFORMATION.
(a)
The Lender and its advisors, if any, have been, and for so long as the Debenture
remains outstanding will continue to be, furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by the Lender
or its advisors. The Lender and its advisors, if any, have been, and for so long
as the Debenture remains outstanding will continue to be, afforded the
opportunity to ask questions of the Company. Notwithstanding the foregoing, the
Company has not disclosed to the Lender any material nonpublic information and
will not disclose such information unless such information is disclosed to the
public prior to or promptly following such disclosure to the Lender. The Lender
is not aware of any facts that may constitute a breach of any of the Company's
representations and warranties made herein.
10. CHOICE OF LAW & VENUE.
(a)
All questions concerning the construction, validity, enforcement and
interpretation of this Debenture shall be governed by and construed and enforced
in accordance with the internal laws of the State of Delaware, without regard to
the principles of conflicts of law thereof. Any claim or controversy arising out
of or relating to the interpretation, application or enforcement of any
provision of this Agreement, shall be submitted for resolution to a court of
competent jurisdiction in New York. The parties hereby consent to personal
jurisdiction and venue in New York.
8
11. WAIVER OF TRIAL BY JURY.
(a)
Each Party to this Agreement agrees that any suit, action, or proceeding,
whether claim or counterclaim, brought or instituted by any party hereto or any
successor or assign of any party on or with respect to this Agreement shall be
tried only by a court and not by a jury. Each and every party hereby knowingly,
expressly, voluntarily and intentionally waives any right to a trial by jury in
any such suit, action or proceeding.
9
IN WITNESS WHEREOF, the Company has caused this
Debenture to be executed, sealed and delivered on the date first above written.
World Moto, Inc
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By: |
/s/ Paul Giles |
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Name: Paul Giles |
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Title: CEO |
Macallan Partners LLC.
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By: |
/s/ Adam Didia |
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Name: Adam Didia |
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Title: Member
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10
Exhibit 31.1
OFFICERS CERTIFICATE
PURSUANT TO SECTION 302
I, Paul Giles, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of
World Moto, Inc. for the period ended March 31, 2015; |
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2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
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3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
report; |
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4. |
The Registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the Registrant and
have: |
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a. |
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
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b. |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
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c. |
Evaluated the effectiveness of the Registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures as of the end of the period covered by this report based on
such evaluation; and |
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d. |
Disclosed in this report any change in the Registrants
internal control over financial reporting that occurred during the
Registrants most recent fiscal quarter (the Registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the Registrants internal
control over financial reporting; and |
5. |
The Registrants other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Registrants auditors and the audit committee
of the Registrants board of directors (or persons performing the
equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrants ability to
record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrants internal control over financial
reporting. |
Date: May 20, 2015 |
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By: /s/ Paul Giles |
Name: Paul Giles |
Title: Chief Executive Officer (Principal Executive
Officer) |
Exhibit 31.2
OFFICERS CERTIFICATE
PURSUANT TO SECTION 302
I, Lisa Ziomkowski-Boten, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of
World Moto, Inc. for the period ended March 31, 2015; |
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2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
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3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
report; |
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4. |
The Registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the Registrant and
have: |
|
a. |
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
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|
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b. |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
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c. |
Evaluated the effectiveness of the Registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures as of the end of the period covered by this report based on
such evaluation; and |
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d. |
Disclosed in this report any change in the Registrants
internal control over financial reporting that occurred during the
Registrants most recent fiscal quarter (the Registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the Registrants internal
control over financial reporting; and |
5. |
The Registrants other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Registrants auditors and the audit committee
of the Registrants board of directors (or persons performing the
equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrants ability to
record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrants internal control over financial
reporting. |
Date: May 20, 2015 |
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By: /s/ Lisa Ziomkowski-Boten |
Name: Lisa Ziomkowski-Boten |
Title: Treasurer (Principal Financial Officer and
Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS
ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of World
Moto, Inc. (the Company) for the period ended March 31, 2015 as filed with the
Securities and Exchange Commission on the date hereof (the Report), the
undersigned, in the capacity and on the date indicated below, hereby certifies
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to his knowledge:
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1. |
The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and |
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2. |
The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operation
of the Company. |
Date: May 20, 2015 |
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By: /s/ Paul Giles |
Name: Paul Giles |
Title: Chief Executive Officer (Principal Executive
Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of World
Moto, Inc. (the Company) for the period ended March 31, 2015 as filed with the
Securities and Exchange Commission on the date hereof (the Report), the
undersigned, in the capacity and on the date indicated below, hereby certifies
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to her knowledge:
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1. |
The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and |
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2. |
The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operation
of the Company. |
Date: May 20, 2015 |
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By: /s/ Lisa Ziomkowski-Boten |
Name: Lisa Ziomkowski-Boten |
Title: Treasurer (Principal Financial Officer and
Principal Accounting Officer) |